Trapped in the Municipal Mindset

New Delhi will continue to treat state governments as municipalities if they behave that way.

For over a month now, the collective mindspace of political junkies in India has been preoccupied with the assembly elections in a few Indian states. Uttar Pradesh and Punjab elections dominated the airwaves. Even the Government of India’s budget, analysed and debated in print for a month or more, was eclipsed by frantic reasoning of who will win where and how.

In that din, the budgets of India’s state governments did not seem significant. And yet, despite being long overshadowed by Government of India’s budget numbers, they hold much significance. The Union Budget spends a little less than 16,000 rupees per Indian. In comparison, the Karnataka budget, tabled last week, will be spending almost 27,700 rupees per resident. And Karnataka is no outlier. Gujarat and Tamil Nadu spend similar amounts, and Kerala and Haryana spend more than 30,000 rupees per resident.

These are big numbers. Government of Karnataka has budgeted over 1.86 lakh crore rupees this year, which comes to over US$28 billion. Along with the budget, Chief Minister Siddaramaiah (also the state’s Finance Minister) has used his bully pulpit to announce a host of policy measures and visions.

Siddaramaiah started off the budget speech on a grand note, interpreting what Ram Rajya means for a 21st century Karnataka and India, not ceding even the mythological space to his political adversaries. Siddaramaiah interpreted Ram Rajya as “a concept representing hunger-free, exploitation-free, overall development with deep rooted harmony.”

The story went quickly downhill from there. The budget speech is rife with things that boggle the mind. Partly in charge of the destinies of some 65 million people, the budget speech — like budget speeches of his colleagues in other states and at New Delhi — was filled with trivial details not worth his time.

In a two-hour speech without pause, the Chief Minister discussed an overbridge at Doddanekundi junction of Bangalore’s infamous outer ring road, promised a sports swimming facility at Udupi, a synthetic football turf in Bellary, a two-crore-rupee grant for the development of Chhatrapati Shivaji’s father’s tomb, and a four-crore-rupee grant for a special child-friendly court in Bangalore.

Just look at the scale of these problems. All these little details are very important – but should be attended to by local mayors, corporators, panchayat leaders and others. A Chief Minister is the steward of a government that serves millions, not the councillor of a municipal ward of 5000 voters. Or a village panchayat head.

One can argue that state governments are doing local governments’ jobs because New Delhi does not allow them to do anything else bigger. This has never been less true.

The framers of the Indian constitution would not be surprised by the size of State government budgets, even if many of us are. The constituent assembly foresaw and put together a constitutional structure where the Union government had greater powers of taxation, but the states had more under their care and needed to collectively spend more than the Union. The Finance Commission, an exemplary constitutional body in a country with few good institutions, was designed precisely for this. The commission meets every five years or so to decide how to split the tax pie — vertically between the Union and the states, and horizontally between the states.

The Union Government in India had used extra-constitutional and political means to take on the mantle of progress from the states, but no more. Indians have mostly looked up to the Government of India alone to drive the development agenda in the country. State governments were important, but relegated to a secondary role. The Planning Commission had a big role in determining how and what the states could spend money on.

Two big reforms were responsible in tilting the Union-State dynamic in the states’ favour. First, the Planning Commission was abolished which meant that states no longer receive diktats in the form of ‘plans’ designed in Delhi’s power corridors with token inputs from states. The birth-death-rebirth cycle of Soviet Era Five Year Plans was struck down in 2015, and finally attained moksha with this budget.

Second, the Fourteenth Finance Commission granted the states more fiscal autonomy. Specifically, the commission got a fresh mandate to review how the entire pool of divisible taxes (the ‘pie’) would be split between the Union and the states. For the last several decades, the finance commissions only had the mandate to review ‘non-plan’ monies and expenditures, with ‘plan’ being the domain of the Planning Commission.

This might sound like arcana, but tied funds to states have suddenly become a lot more untied. Many strings linking New Delhi with local spending have been cut. Taken together, the two changes have meant that states have greater and greater autonomy on how to spend their own resources.

It’s not just the size of their wallets that makes states important. The Constitution expects states to play the lead role in provision of key sectors such as health, education, policing, and agriculture. If India’s growth has to come from liberalising markets and increasing freedoms, most of the factor markets are under the control of State governments.

In the past, State governments have led by example, even if sparingly. Many ideas that the Union government now swears by, such as the Mid Day Meal Scheme or the Rural Employment Guarantee Scheme were creations of a few enterprising state governments. Ideas both good and bad have come out of state-level experiments, infecting the rest of the India later. They can now do so at higher levels.

And yet, this Karnataka budget concerned itself with overbridges, swimming facilities and football turfs. This is a flawed mindset, and an opportunity lost. To paraphrase Ken Blanchard, if India’s states want to soar like ambitious nation-states, they had better not quack like municipalities.

About the author

Pranay Kotasthane

Pranay Kotasthane heads the geostrategy programme at the Takshashila Institution. His research interests focus on geostrategy, geopolitics of the Indian subcontinent, public policy, economic reasoning and urban issues.